Treasurer’s Report
The National Gallery’s financial position strengthened in fiscal year 2023 due to the favorable performance of the investment portfolio, combined with prudent management of expenses; strong support from Congress and the administration; and the continued generosity of private citizens, foundations, and corporations. Attendance continued its upward trend toward pre-pandemic levels, increasing 19.0 percent to 3.8 million visitors. Website visitation increased 37.0 percent to 18.1 million. This success contributed to a modest operating surplus in fiscal year 2023.
The federal commitment to operate and maintain the National Gallery originates in the 1937 Joint Resolution of Congress that accepted Andrew W. Mellon’s unprecedented gift to the nation of his art collection, the funds to construct the West Building, and an endowment. The Joint Resolution pledged that the United States would provide funds for the upkeep, administrative expenses, and costs of operations, including the protection and care of the works of art given to the nation, so that the National Gallery would at all times be properly maintained and remain open to the public free of charge.
The National Gallery receives annual federal appropriations to support core programs and renovations of its buildings as part of the budget approved annually by Congress and signed by the president. Income from endowments as well as gifts and grants designated by donors for other specific purposes supplement the federal appropriations. Endowment support for expenditures is computed under the National Gallery’s spending policy and used in accordance with donor-imposed restrictions. The National Gallery is a nonprofit organization exempt from federal income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code.
Financial Position
The National Gallery’s net assets totaled $1.5 billion on September 30, 2023, increasing by $123.9 million or 8.9 percent during the fiscal year. The investment portfolio returned 15.0 percent ending the fiscal year at $1.1 billion, an increase of $118.2 million over fiscal year 2022 net of new gifts, manager fees, and spending to support operations and art purchases. The portfolio’s performance was driven by the strong performance of global public equity markets and the portfolio’s growth orientation. The portfolio also benefitted from its low exposure to private investments, which significantly underperformed the public markets.
Property, plant, and equipment assets increased $7.0 million over the prior year, representing $23.4 million of investments in capital expenditures offset by $16.4 million of depreciation expense. The capital expenditures primarily funded renovation projects included in the National Gallery’s comprehensive Master Facilities Plan. The Master Facilities Plan is a federally funded, long-term capital renewal program designed to address life safety, security, and infrastructure improvements necessary to maintain and protect the National Gallery’s buildings. Major West Building renovation projects included the exterior stone facade repair and roof replacement, as well as upgrades to the fire alarm systems. Major East Building renovation projects completed included the replacement of the original East Building main Atrium skylight dating to the opening of the building in 1978, and other major building renovations including a new fire stair serving Tower 3. Construction began on the new joint art storage facility with the Smithsonian Institution at its Museum Support Center in Suitland, Maryland. The new shared structure will provide the National Gallery with 61,000 square feet of art storage space at a total cost of approximately $71.5 million. Completion is planned for 2025 and is dependent on future federal appropriations.
Total liabilities increased $21.7 million over fiscal year 2022 due mainly to a new operating lease liability of $18.8 million. This new liability resulted from the implementation of a new accounting standard that requires the National Gallery to record future rental expenses on leased property over the life of the lease. The liability is offset by a similar increase in lease assets.
Operating Results
Operating activity reflects day-to-day operations of running the National Gallery, including salaries, benefits, rent, utilities, contractual services, supplies, insurance, special events, and other costs. The National Gallery ended the fiscal year with an unrestricted operating surplus of $4.6 million before depreciation and amortization. Unrestricted operating support and revenue totaled $207.1 million in fiscal year 2023, an increase of $25.9 million over fiscal year 2022. Federal appropriations for operations increased to $160.1 million compared to $143.4 million in the prior year. Operating gifts and grants from individuals, corporations, and foundations decreased to $8.1 million compared to $10.9 million in the prior year, due primarily to a large bequest received last fiscal year. Funds appropriated for operations under the National Gallery’s investment spending policy increased to $36.4 million compared to $25.3 million in fiscal year 2022. Royalties and other income increased to $2.4 million compared to $1.5 million in the prior year.
Fiscal year 2023 operating expenses totaled $202.4 million, increasing $25.8 million over the prior year. The increase in expenses resulted from costs of a new partnership agreement with the Corcoran School of the Arts and Design at the George Washington University; increased building security services; cost of living pay and benefit increases for staff; modernization of IT systems; website design; increased investments in digital outreach; and the opening of several major special exhibitions during the fiscal year including Sargent and Spain, Vittore Carpaccio: Master Storyteller of Renaissance Venice, Philip Guston Now, and Canova: Sketching in Clay.
The National Gallery’s collection was augmented by several major purchases in fiscal year 2023, including David Drake’s Storage Jar, 1859; Mattia Preti’s A Man Cutting Tobacco, 1660s; Simone Leigh’s Sentinel, 2022; Robert Longo’s The Whale (The United States Capitol), 2012–2013, The Forest (White House), 2019, and The Rock (The Supreme Court of the United States—Split), 2018; Anne Vallayer-Coster’s Still Life with Flowers in an Alabaster Vase and Fruit, 1783; and Remedios Varo’s Banqueros en acción, 1962.
Auditors’ Report and Financial Statements
Summarized financial information is shown below. The National Gallery’s complete fiscal year 2023 audited financial statements, related notes, and the auditors’ reports thereon can be found on the National Gallery’s website. The National Gallery’s external auditors issued an unmodified opinion on the fiscal year 2023 financial statements and did not identify any material weaknesses, significant deficiencies, or areas of noncompliance with laws and regulations.
William W. McClure
Treasurer
